Pound resilient as Brexit plot thickens

MPs once again defeated Boris Johnson in his bid to call a snap election, which helped the pound bounce to levels not seen since late July AFP / ISABEL INFANTES

The pound strengthened against both the dollar and the euro on Tuesday as investors took heart from legislation blocking a no-deal Brexit.

Sterling also received a boost from stronger British economic growth than markets had been expecting and statistics showing unemployment at a 45-year low.

This in turn fueled expectations that the Bank of England will refrain from cutting rates, something which could undermine the already embattled currency further still.

"With the risk of an imminent no-deal Brexit declining, the market is now pricing less aggressive easing from the Bank of England," said Petr Krpata, strategist at ING, saying this had allowed sterling to outperform its peers.

European stock markets, meanwhile, drifted sideways, awaiting a key European Central Bank meeting this week, while US markets ended a choppy session little changed.

Apple got a boost as it unveiled new iPhones, including a lower-priced offering, and set launch dates for its original video offering, Apple TV+, and its game subscription service.

The British parliament is now suspended, which could lead to a period of relative Brexit calm, analysts said.

"With no more parliamentary sessions due for five weeks, the focus now turns to the prospects of a new deal being negotiated between the UK and the EU," said XTB analyst David Cheetham.

British Prime Minister Boris Johnson failed again late on Monday to get MPs to back a snap election.

But City Index analyst Fiona Cincotta cautioned that the pound remains fragile.

"With no resolution to Brexit or any sense of control returning to UK politics, the pound could struggle to keep its head above water in the coming sessions," she said.

Europe's main stock markets showed mild gains at the close as investors mulled speculation that the ECB could deliver economy-boosting measures on Thursday.

"Traders are playing the wait-and-see game in relation to the ECB meeting," noted CMC Markets analyst David Madden.

"To a certain extent, some form of monetary easing from the ECB has been priced in."